First-time buyers will need to find £4,000 a year more to pay the mortgage when interest rates rise to their highest in a decade.
Buyers with 5pc deposits have been spared the significant interest rate rises suffered by more affluent borrowers so far this year.
But rampant inflation means they will soon bear the brunt of further increases, according to analysis by the Centre for Economics and Business Research.
The average rate of a two-year fixed deal for a borrower with a 5pc deposit will climb to 5.8pc by the end of next year, up from 3pc today, if the Bank of England’s central interest rate hits 2.5pc as predicted. Mortgage rates for first-time buyers have not exceeded 5.1pc since the second half of 2013, according to the Cebr.
It would mean an average first-time buyer with a £210,205 mortgage over a 25-year term would see their monthly payments rise from £997 to £1,329 – equivalent to an extra £3,984 a year, or roughly 12pc of the national average salary.
By contrast, the current average two-year fixed rate for a borrower with a 25pc deposit is currently 2.7pc, but this will rise to 4.7pc by the end of next year, according to Cebr.
In the past six months banks have kept pricing for first-time buyer deals competitive and shielded borrowers from successive interest rate rises by the Bank of England. But they are due a sharp correction.
The Cebr has forecast rates on two-year fixed 5pc deposit deals to surge by 1.7 percentage points to 4.7pc in the next three months, rising again to 5.1pc by the end of 2022.
Karl Thompson of the Cebr said: “Borrowing costs for those with lower savings are set to rise more quickly than those with larger deposits, meaning the recent narrowing between 25pc deposit and 5pc deposit rates will reverse into 2023. This spells a disproportionately harder time for first-time buyers as they try to access the market over the coming years.”
Mortgage broker Hina Bhudia, partner at Knight Frank Finance, said: “Affordability is only going to get worse for first time buyers. Those that do manage to save for a deposit now face difficult choices as to how much debt they should take on while the cost of living continues to rise dramatically.”